Currency devaluation against the US dollar refers to a decline in the value of a country’s currency relative to the USD. This often leads to an increase in the cost of imports and a decrease in the domestic purchasing power. Many factors contribute to the devaluation of a currency, including global economic conditions, inflation, trade imbalances, and political events.
Recently, the Indian Rupee (INR) has been experiencing a decline against the USD, causing concerns about the economy’s stability and the rising cost of living for ordinary citizens.
In this context, we explore the reasons behind the fall of the INR, potential consequences, and whether the rupee could breach the 90 mark against the dollar.
Reasons for the Fall of INR
Several factors are contributing to the falling INR against the USD. One significant reason is the US Federal Reserve’s decision not to cut interest rates on US sovereign bonds, maintaining higher yields on US assets, thus attracting capital inflows into the US.
President Trump’s decision to impose a 25% tariff on goods from Canada and Mexico and a 10% tariff on China has triggered retaliatory actions. Both Canada and Mexico have responded by imposing equivalent tariffs on U.S. goods. This escalating trade conflict raises concerns about potential supply disruptions and could negatively impact global economic growth and trade relations.
With the US dollar continuing to strengthen globally, the INR could face further pressure. While the Fed’s stance and geopolitical tensions have led to capital outflows, it’s difficult to predict if the INR will breach the 90 mark against the USD.
Positive Impact of INR Devaluation
Higher Exports
A weaker INR can boost exports as Indian goods become cheaper for foreign buyers, making them more competitive globally. This can benefit sectors like textiles, chemicals, and engineering products, encouraging increased export activity. With a lower exchange rate, Indian exporters can see higher demand, potentially improving the country’s trade balance and supporting economic growth.
Higher Net Remittance from Abroad
The devaluation of the INR can lead to higher net remittances from abroad. For Indian expatriates working in countries where the currency is stronger than the rupee, sending money back home becomes more valuable. This increase in remittances can provide a boost to India’s foreign exchange reserves and improve the country’s current account balance, helping to offset some of the negative effects of currency depreciation.
Stocks which will benefit from the falling rupee value against dollars are:
TATA Consultancy Services Limited
Tata Consultancy Services (TCS) is a global leader in IT services, consulting, and business solutions. For Q3, TCS reported ₹63,973 crore in revenue, with 47% coming from North America, mainly from the U.S., highlighting its strong presence in the region. TCS continues to thrive across various sectors, leveraging its expertise in digital transformation, cloud computing, and enterprise solutions to drive growth.
Infosys Limited
Infosys is a global IT services and consulting giant with a strong presence in North America. It reported Q3 revenue of ₹41,764 crore, with 58% coming from the U.S. This performance reflects Infosys’s focus on digital and cloud services, which are in high demand across industries. The company continues to expand its offerings in digital transformation, cybersecurity, and automation to maintain growth in the competitive North American market.
Wipro Limited
Wipro is a leading IT services company that provides consulting, digital, and technology solutions. For Q3, Wipro recorded ₹22,319 crore in revenue, with 62.5% of that coming from North America, showcasing its heavy reliance on the region. The company has been focusing on strengthening its position in the U.S. market by offering innovative services in areas like cloud computing, artificial intelligence, and data analytics to drive future growth.
Dr. Reddy’s Laboratories Limited
Dr. Reddy’s Laboratories is a prominent pharmaceutical company with a strong global footprint. The company reported a Q3 revenue of ₹7,375 crore, with 46% coming from North America, excluding its Pharmaceutical Services and Active Ingredients segment. Dr. Reddy continues to expand its presence in the U.S. market, focusing on the development and distribution of generic drugs, biosimilars, and over-the-counter products.
Sun Pharmaceuticals Limited
Sun Pharmaceuticals, a major player in the pharmaceutical sector, specializes in formulations and active ingredients. For Q3, the company achieved ₹12,826 crore in revenue (considering only formulations), with 31% of it derived from the U.S. market. Sun Pharmaceuticals continues to strengthen its position in the North American market by expanding its portfolio of generic drugs and active pharmaceutical ingredients, contributing to its growth in both the domestic and international markets.
Written By: Dipangshu Kundu
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